The Question is Not Whether "To Devalue or Not to Devalue?" But Rather "What to Devalue?"
English (1962 downloads)
In this policy brief, we review the problem of a lack of competitiveness and the policy options to improve competitiveness and hence promote economic growth. Inadequate competitiveness can be measured as a sustained current account deficit of the balance of payments. We discuss the advantages and disadvantages of three devaluation policy options: an external devaluation, an internal devaluation, and a fiscal devaluation. We conclude that the latest fashionable option, fiscal devaluation, offers gain with no pain but detailed country-specific simulations are needed to determine which option is the better one.